Changed recommendation - Yes, we accept
The beginning - positive to the idea
When the bid/merger was announced December 19th, I had a long-planned meeting in Oslo with Rune Syvertsen and Jens Rugseth. My first view was on the positive side since the Industrial logic was strong and obvious. You could argue the terms were not good enough, but with the board and founding fathers "on the same side as other shareholders" you should probably accept. Since Crayon was, and still are, our biggest investment we decided to "go as deep as possible" to really understand.
The Beauty and the Beast - we turned to "No thank you"
We gradually learned that SoftwareOne was even worse than expected and Crayon was better. "Plan A" started to grow - Let's share our findings and analyses and try to stop the merger. If we fail, "Plan B" is not a poor option, let's accept. Our efforts would maybe also have highlighted some potential issues of the merger, and made the board and management better prepared for challenges following such a merger. "Plan C" was to sell out when and if timing felt ok.
Voting date - 34% declined but "plan A is probably dead"
On the "voting date" 34% of Crayons shareholders did not sell, which was rather exceptional since the two boards and founding fathers voted yes. Have you ever seen such a situation in any merger worldwide? If you have, please update me 🙂 The problem is still - it's probably not good enough. We find 34% "no thank you" interesting, but Folketrygdfondets acceptance turned the situation, and we find a 2/3 majority to be troublesome. If SoftwareOne waiver it's 90% threshold we might be fu.... Then we are up against a potential long-lasting conflict with limited upside and some downside.
Our recommendation today - accept and go to "Plan B"
We will accept the deal and not sell out since;
· our stand-alone price on SoftwareOne is higher than current share price
· our stand-alone price on Crayon is higher than current share price
· the "offer price" on Crayon today is 126 NOK since 69 NOK cash+ 0,82 SWON shares per Crayon share = 57 NOK
· the market they operate in is a growing market and their combined moat is pretty strong
· industrial logic is obvious
· we trust some of the people in management and in the board
· our input on "why mergers fail" and what's wrong with "the Beast" might help
The alternative - sell out
Sell Crayon quickly and invest somewhere else. It could be the right decision, and you will get cash right away.
A piece of advice - a few points from "the Beauty and the Beast":
· Rephrase your wording about your consultancy business, it's far from good
· Don't continue desperately trying to convince everyone about your "sensible adjustments". Swiss, Norwegian and other shareholders are tired and we "see through it"
· Don't activate 50 MCHF or more every year on your software development, it catches up to you…
· Stop lying about the future, it catches up to you…
· Stop misleading the market about today's situation, it catches up to you…
A friendly comment - do what you must do and have fun:
· Don't underestimate the challenges of a merger
· We think Rafi and Melissa can work very well together, dual leadership in this situation is a plus
· Since SoftwareOne's credibility among investors is terrible, please appoint Brede as CFO and Kjell Arne as IR responsible
· Since most shareholders have voted yes, we are probably wrong, and you are right. Prove it 🙂
· Communication is crucial for your credibility, please don't lie when explaining Q1 figures
Good luck to you Rafi and Melissa🙂
It has certainly been enjoyable so far. We are probably more competent, we have earned some money, and we have had fun. We don't have a target price on the new company, but we'll be back after Q1 figures.
We trust you will end up like the story in The Beauty and the Beast😃
Stay tuned,
David and Sverre
Hvaler Invest AS
Lillestrøm, Norway
23.04.25
Disclaimer:
Hvaler Invest is a significant shareholder so you cannot trust us (or perhaps you can?)